Credit card debt pushes retail gains

Even while consumers spent less overall at retail stores last quarter, they continued to use their credit cards to make purchases more often than with cash.

Target, the second-largest discount retailer in the country, said that it posted a profit in the second quarter of 14 percent, largely because earnings through the credit card debt consumers took on with store-branded cards increased significantly. A Bloomberg report on the subject said that the company’s net income rose $679 million in the second quarter alone, driven by its card unit more than doubling what it made from the previous period.

The report said that this was largely because Target increased its lending standards, and saw its bad debt expense fall by more than half, to $138 million in the second quarter. Profits are expected to rise again in the third quarter because of the back-to-school shopping season, which is the second-busiest for retailers after the winter holidays.

However, after the economy lost about 350,000 jobs between June and July – pushed primarily by the expiration of temporary positions with the U.S. Census – consumer confidence fell, and spending went with it.

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